Question 1

Figure 23.2.2
  
-Refer to Figure 23.2.2. In Figure 23.2.2, a decrease in expected profit will result in a movement from point E to

Accepted Answer

A) point F. 
B) point G. 
C) point H. 
D) point I. 
E) either point G or point H. 
A) point F. 
B) point G. 
C) point H. 
D) point I. 
E) either point G or point H.

Question 2

________ increases households' saving.

Accepted Answer

A) A decrease in the real interest rate 
B) A tax cut that increases disposable income 
C) Higher expected future income 
D) An increase in wealth 
E) An increase in default risk 
A) A decrease in the real interest rate 
B) A tax cut that increases disposable income 
C) Higher expected future income 
D) An increase in wealth 
E) An increase in default risk

Question 3

Figure 23.2.1
  
-Refer to Figure 23.2.1. In Figure 23.2.1, the economy is at point A on the initial demand for loanable funds curve DLF0. What happens if the real interest rate rises?

Accepted Answer

A) There is a movement to a point such as B on the demand for loanable funds curve DLF0. 
B) The demand for loanable funds curve shifts rightward to curve DLF2. 
C) The demand for loanable funds curve shifts leftward to curve DLF1. 
D) Either A or B can occur. 
E) Either A or C can occur. 
A) There is a movement to a point such as B on the demand for loanable funds curve DLF0. 
B) The demand for loanable funds curve shifts rightward to curve DLF2. 
C) The demand for loanable funds curve shifts leftward to curve DLF1. 
D) Either A or B can occur. 
E) Either A or C can occur.

Question 4

Southton has investment of $100, private saving of $90, net taxes of $25, government expenditure of $30, exports of $25 and imports of $10. What is national saving?

Accepted Answer

A) $85 
B) $90 
C) $95 
D) $100 
E) $105 
A) $85 
B) $90 
C) $95 
D) $100 
E) $105

Question 5

Gross investment

Accepted Answer

A) is the total amount spent on new capital. 
B) includes only replacement investment. 
C) equals wealth minus saving. 
D) equals saving minus wealth. 
E) is the change in the value of capital 
A) is the total amount spent on new capital. 
B) includes only replacement investment. 
C) equals wealth minus saving. 
D) equals saving minus wealth. 
E) is the change in the value of capital

Question 6

At the beginning of the year, Tom's Tubes had capital of 5 tube-inflating machines. During the year, Tom scrapped 2 old machines and purchased 3 new machines. Tom's capital at the end of year was

Accepted Answer

A) 1 machine. 
B) 2 machines. 
C) 3 machines. 
D) 6 machines. 
E) 8 machines. 
A) 1 machine. 
B) 2 machines. 
C) 3 machines. 
D) 6 machines. 
E) 8 machines.

Question 7

A decrease in the government budget deficit decreases the ________ loanable funds and an increase in the government budget surplus increases the ________ loanable funds.

Accepted Answer

A) demand for; demand for 
B) demand for; supply of 
C) supply of; demand for 
D) supply of; supply of 
E) demand for loanable funds and the supply of; supply of loanable funds and the demand for 
A) demand for; demand for 
B) demand for; supply of 
C) supply of; demand for 
D) supply of; supply of 
E) demand for loanable funds and the supply of; supply of loanable funds and the demand for

Question 8

In January 2014, Tim's Gyms, Inc. owned machines valued at $1 million. During the year, the market value of the machines fell by 10 percent. During 2014, Tim spent $200,000 on new machines. During 2014, Tim's net investment was

Accepted Answer

A) $1 million. 
B) $300,000. 
C) $200,000. 
D) $100,000. 
E) $1.1 million. 
A) $1 million. 
B) $300,000. 
C) $200,000. 
D) $100,000. 
E) $1.1 million.

Question 9

If disposable income increases, people ________ saving and the real interest rate will ________.

Accepted Answer

A) increase; rise 
B) decrease; rise 
C) increase; fall 
D) decrease; fall 
E) increase; rise or fall depending on the shift of the demand curve for loanable funds 
A) increase; rise 
B) decrease; rise 
C) increase; fall 
D) decrease; fall 
E) increase; rise or fall depending on the shift of the demand curve for loanable funds

Question 10

If the economy's capital decreases over time,

Accepted Answer

A) net investment is positive. 
B) depreciation is less than zero. 
C) depreciation exceeds gross investment. 
D) gross investment equals net investment. 
E) gross investment is zero. 
A) net investment is positive. 
B) depreciation is less than zero. 
C) depreciation exceeds gross investment. 
D) gross investment equals net investment. 
E) gross investment is zero.

Question 11

Capital is

Accepted Answer

A) the tools, instruments, machines, buildings, and other items that have been produced in the past and that are used today to produce goods and services. 
B) financial wealth. 
C) the sum of investment and government expenditure on goods. 
D) net investment. 
E) gross investment. 
A) the tools, instruments, machines, buildings, and other items that have been produced in the past and that are used today to produce goods and services. 
B) financial wealth. 
C) the sum of investment and government expenditure on goods. 
D) net investment. 
E) gross investment.

Question 12

Suppose that a bond promises to pay its holder $100 a year forever. If the price of the bond increases from $1,000 to $1,250, then the interest rate on the bond

Accepted Answer

A) rises from 8 percent a year to 10 percent a year. 
B) falls from 10 percent a year to 6 percent a year. 
C) falls from 10 percent a year to 8 percent a year. 
D) rises because the bond becomes a better investment. 
E) does not change because the purchaser buys the bond knowing that interest rates will be adjusted. 
A) rises from 8 percent a year to 10 percent a year. 
B) falls from 10 percent a year to 6 percent a year. 
C) falls from 10 percent a year to 8 percent a year. 
D) rises because the bond becomes a better investment. 
E) does not change because the purchaser buys the bond knowing that interest rates will be adjusted.

Question 13

Table 23.2.1
  
-Refer to Table 23.2.1. Private saving is

Accepted Answer

A) -$15 million. 
B) $40 million. 
C) $25 million. 
D) $20 million. 
E) $80 million. 
A) -$15 million. 
B) $40 million. 
C) $25 million. 
D) $20 million. 
E) $80 million.

Question 14

Figure 23.2.3
Refer to the figure below to answer the following questions.
  
-In Figure 23.2.3, if the real interest rate is constant at 6 percent and and expected profit rises, the amount of loanable funds demanded will be

Accepted Answer

A) less than $450 billion. 
B) $450 billion. 
C) between $300 billion and $450 billion. 
D) greater than $450 billion. 
E) zero. 
A) less than $450 billion. 
B) $450 billion. 
C) between $300 billion and $450 billion. 
D) greater than $450 billion. 
E) zero.

Question 15

According to the Ricardo-Barro effect,

Accepted Answer

A) government deficits raise the real interest rate. 
B) taxpayers fail to foresee that government deficits imply higher future taxes. 
C) households increase personal saving when governments run budget deficits. 
D) government budget deficits increase households' expected future disposable income. 
E) a government deficit decreases the supply of loanable funds. 
A) government deficits raise the real interest rate. 
B) taxpayers fail to foresee that government deficits imply higher future taxes. 
C) households increase personal saving when governments run budget deficits. 
D) government budget deficits increase households' expected future disposable income. 
E) a government deficit decreases the supply of loanable funds.

Question 16

If the government begins to run a larger budget deficit, the demand for loanable funds ________ and the real interest rate ________.

Accepted Answer

A) decreases; falls 
B) decreases; rises 
C) increases; rises 
D) increases; falls 
E) increases; rises or falls depending on the change in the supply of loanable funds 
A) decreases; falls 
B) decreases; rises 
C) increases; rises 
D) increases; falls 
E) increases; rises or falls depending on the change in the supply of loanable funds

Question 17

According to the Ricardo-Barro effect,

Accepted Answer

A) the government budget has no effect on the real interest rate. 
B) a government budget deficit crowds out private investment. 
C) financing government spending with taxes has a less severe effect on private investment than financing through government borrowing. 
D) a government budget surplus crowds out private investment. 
E) a government budget surplus crowds out private saving. 
A) the government budget has no effect on the real interest rate. 
B) a government budget deficit crowds out private investment. 
C) financing government spending with taxes has a less severe effect on private investment than financing through government borrowing. 
D) a government budget surplus crowds out private investment. 
E) a government budget surplus crowds out private saving.

Question 18

Investment is financed by which of the following?
I. Government spending
II. Household saving
III. Borrowing from the rest of the world

Accepted Answer

A) I, II, and III 
B) I and II only 
C) I and III only 
D) II and III only 
E) None of the above 
A) I, II, and III 
B) I and II only 
C) I and III only 
D) II and III only 
E) None of the above

Question 19

During a recession, firms decrease their profit expectations. As a result, there is a ________ shift of the ________ loanable funds curve.

Accepted Answer

A) rightward; supply of 
B) leftward; demand for 
C) rightward; demand for 
D) rightward, supply of 
E) leftward; demand for loanable funds curve and supply of 
A) rightward; supply of 
B) leftward; demand for 
C) rightward; demand for 
D) rightward, supply of 
E) leftward; demand for loanable funds curve and supply of

Question 20

The Acme Stereo Company had capital of $24 million at the beginning of the year. At the end of the year, the firm had a capital stock of $20 million. Its

Accepted Answer

A) net investment was some amount but we need more information to determine the amount. 
B) net investment was $4 million for the year. 
C) gross investment was zero. 
D) net investment was -$4 million for the year. 
E) depreciation was $4 million. 
A) net investment was some amount but we need more information to determine the amount. 
B) net investment was $4 million for the year. 
C) gross investment was zero. 
D) net investment was -$4 million for the year. 
E) depreciation was $4 million.

Figure 23.2.2 -Refer to Figure 23.2.2. In Figure 23.2.2, a decrease in expected profit will result in a movement from point E to

________ increases households' saving.

Figure 23.2.1 -Refer to Figure 23.2.1. In Figure 23.2.1, the economy is at point A on the initial demand for loanable funds curve DLF₀. What happens if the real interest rate rises?

Southton has investment of $100, private saving of $90, net taxes of $25, government expenditure of $30, exports of $25 and imports of $10. What is national saving?

Gross investment

At the beginning of the year, Tom's Tubes had capital of 5 tube-inflating machines. During the year, Tom scrapped 2 old machines and purchased 3 new machines. Tom's capital at the end of year was

A decrease in the government budget deficit decreases the loanable funds and an increase in the government budget surplus increases the loanable funds.

In January 2014, Tim's Gyms, Inc. owned machines valued at $1 million. During the year, the market value of the machines fell by 10 percent. During 2014, Tim spent $200,000 on new machines. During 2014, Tim's net investment was

If disposable income increases, people saving and the real interest rate will .

If the economy's capital decreases over time,

Capital is

Suppose that a bond promises to pay its holder $100 a year forever. If the price of the bond increases from $1,000 to $1,250, then the interest rate on the bond

Table 23.2.1 -Refer to Table 23.2.1. Private saving is

Figure 23.2.3 Refer to the figure below to answer the following questions. -In Figure 23.2.3, if the real interest rate is constant at 6 percent and and expected profit rises, the amount of loanable funds demanded will be

According to the Ricardo-Barro effect,

If the government begins to run a larger budget deficit, the demand for loanable funds and the real interest rate .

According to the Ricardo-Barro effect,

Investment is financed by which of the following? I. Government spending II. Household saving III. Borrowing from the rest of the world

During a recession, firms decrease their profit expectations. As a result, there is a shift of the loanable funds curve.

The Acme Stereo Company had capital of $24 million at the beginning of the year. At the end of the year, the firm had a capital stock of $20 million. Its

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Exam 23: Finance, Saving, and Investment

Figure 23.2.2 -Refer to Figure 23.2.2. In Figure 23.2.2, a decrease in expected profit will result in a movement from point E to

________ increases households' saving.

Figure 23.2.1 -Refer to Figure 23.2.1. In Figure 23.2.1, the economy is at point A on the initial demand for loanable funds curve DLF0. What happens if the real interest rate rises?

Southton has investment of $100, private saving of $90, net taxes of $25, government expenditure of $30, exports of $25 and imports of $10. What is national saving?

Gross investment

At the beginning of the year, Tom's Tubes had capital of 5 tube-inflating machines. During the year, Tom scrapped 2 old machines and purchased 3 new machines. Tom's capital at the end of year was

A decrease in the government budget deficit decreases the ________ loanable funds and an increase in the government budget surplus increases the ________ loanable funds.

In January 2014, Tim's Gyms, Inc. owned machines valued at $1 million. During the year, the market value of the machines fell by 10 percent. During 2014, Tim spent $200,000 on new machines. During 2014, Tim's net investment was

If disposable income increases, people ________ saving and the real interest rate will ________.

If the economy's capital decreases over time,

Capital is

Suppose that a bond promises to pay its holder $100 a year forever. If the price of the bond increases from $1,000 to $1,250, then the interest rate on the bond

Table 23.2.1 -Refer to Table 23.2.1. Private saving is

Figure 23.2.3 Refer to the figure below to answer the following questions. -In Figure 23.2.3, if the real interest rate is constant at 6 percent and and expected profit rises, the amount of loanable funds demanded will be

According to the Ricardo-Barro effect,

If the government begins to run a larger budget deficit, the demand for loanable funds ________ and the real interest rate ________.

According to the Ricardo-Barro effect,

Investment is financed by which of the following? I. Government spending II. Household saving III. Borrowing from the rest of the world

During a recession, firms decrease their profit expectations. As a result, there is a ________ shift of the ________ loanable funds curve.

The Acme Stereo Company had capital of $24 million at the beginning of the year. At the end of the year, the firm had a capital stock of $20 million. Its

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Figure 23.2.1 -Refer to Figure 23.2.1. In Figure 23.2.1, the economy is at point A on the initial demand for loanable funds curve DLF₀. What happens if the real interest rate rises?

A decrease in the government budget deficit decreases the loanable funds and an increase in the government budget surplus increases the loanable funds.

If disposable income increases, people saving and the real interest rate will .

If the government begins to run a larger budget deficit, the demand for loanable funds and the real interest rate .

During a recession, firms decrease their profit expectations. As a result, there is a shift of the loanable funds curve.